Marijuana Cultivation? Not On Our Watch, Colorado City Says

Greeley, is the seat of Colorado’s Weld County, the third-largest U.S. agricultural region, yet its lawmakers want nothing to do with cultivating weed.

The City Council has voted to ban marijuana retail sales, as well as the cultivation, testing and manufacturing of pot- related products within its boundaries. The action last month follows a statewide referendum legalizing cannabis for adults.

"The council didn’t believe having actual retail sales and cultivation is in the best interest of public policy," said Roy Otto, the city manager. "The biggest element of the conflict is if the federal government is going to do anything relative to enforcing their authority on this."

Greeley is one of more than two dozen Colorado cities and counties that prohibited retail sales of marijuana after passage of a constitutional amendment in November that made possession of as much as an ounce (28 grams) of pot legal for those over 21. The change also opened the door to retailing the weed.

The state’s 271 municipalities and 64 counties must decide by Oct. 1 whether they will allow retail pot sales, according to Amendment 64, as the law is known. If they choose to do so, they must designate a licensing authority under which businesses would apply. Merchants can open up starting Jan. 1.

The law allows adults to possess marijuana for recreational use, even if the city or county they’re in bans retail sales. Advocates for legalization say it will help stamp out a black market for the drug.

High Stakes

The stakes are high for the state, which plans to use tax revenue from recreational pot to support a regulatory structure that will effectively monitor the development of what is an illegal industry in all other states except Washington.

"If municipalities and counties either delay, or are slow in implementing retail marijuana, or opt out of it completely, that revenue stream is going to impact the state’s ability to hire and build its regulatory and enforcement structure," said Kevin Bommer, deputy director at the Denver-based Colorado Municipal League.

Coloradans will vote in November on whether to tax retail marijuana sales up to 25 percent. Local lawmakers in Boulder and Denver are discussing adding a 5 percent city tax on top of any state levies.

Some communities are basing their decision to allow retail sales in part on whether the state devises a robust regulatory structure for recreational pot -- which will require adequate tax revenue, Bommer said.

A case in point is Aurora, the state’s third largest city, where council members said they were concerned about the state’s ability to monitor pot retailers.

"The state went ahead full steam with medical marijuana and now they’re discovering there were issues they didn’t address," said Debi Hunter Holen, an at-large City Council member.

"It’s not that we don’t want retail marijuana in our city," she said. "It’s that we want to make sure our rules are in place and we can get a better picture of what the state wants."

The Aurora council voted to place a moratorium on recreational cannabis sales through May 2014, asking City Manager George ‘Skip’ Noe to present it with licensing guidelines by then.

Regulators Stretched

The state Revenue Department, the agency that regulates Colorado’s medical marijuana industry, told the legislature in May that it lacked the resources to keep tabs on the existing 1,400 or so pot-related businesses. About 105,000 patients patronize about 500 cannabis dispensaries in the state.

The agency released more than 60 pages of preliminary rules for retailers on July 1, including requirements that pot products include labels declaring potency. It also requires disclaimers that the drug remains illegal outside the state and that there may be health risks tied to consumption.

The rules will be revised later this year. The state will start accepting applications from medical marijuana dispensaries for retail licenses on Oct. 1.

With the rules shaping up, lawmakers in some cities and counties say they are looking to the U.S. government for a response to Amendment 64. The matter is still under review, said Allison Price, a U.S. Justice Department spokeswoman.

Six-Month Moratorium

In Washington state, localities aren’t allowed to ban retail pot sales under a ballot initiative voters passed on Nov. 6, said Mikhail Carpenter, a spokesman for the Washington State Liquor Control Board. Some communities have placed a six-month moratorium on these businesses, he added. The board released proposed rules earlier this month.

Officials in Colorado cities and counties that are choosing to allow retail sales say they’re looking forward to cashing in on additional tax revenue if nearby communities ban pot shops.

"From our perspective, the more of our neighbors who opt out, the more tax revenue for us," said Sal Pace, a commissioner in Pueblo County, located along the foot of the Rocky Mountains in the southwest corner of the state. "If Colorado Springs and El Paso County opt out, we think there’s a really significant business opportunity."

Five medical-marijuana shops in Pueblo County generate up to $10,000 a month in sales taxes, a number that commissioners estimate may reach $75,000 a month with the addition of recreational pot retailers, Pace said.

Conservative Areas

The places that have banned recreational sales tend to be in more Republican areas, including much of the eastern plains. The state’s largest cities remain undecided on retailers.

In Denver, where about half of medical marijuana sales take place, the City Council is discussing how to regulate recreational pot shops, including whether to place a two-year moratorium on new retail stores.

Colorado Springs lawmakers directed the city attorney to draft two ordinances related to recreational marijuana storefront sales. One would let the city ban such sales, the other would impose a temporary moratorium, said Vicki Gomes, a spokeswoman for the City Council. The council will discuss the measures on July 23. Fort Collins, the state’s fourth-largest city, plans to discuss the issue at a work session July 30.

Proponents of legalizing recreational use said that some towns are banning retail sales even though their residents backed the new law.

"I think a number of localities are deciding prematurely to prohibit these businesses," said Mason Tvert, a spokesman for the Marijuana Policy Project, a Washington, D.C.-based group that advocates legalizing pot. "If enough localities are banning these businesses, it increases the possibility that a black market for marijuana will continue to exist."

--Editors: Jeffrey Taylor, Ted Bunker

To contact the reporters on this story: Jennifer Oldham in Denver at joldham1@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net